In November 2022, Mark Zuckerberg, the CEO of Meta Company laid off 11,000 workers, just after Twitter laid off more than 50 percent of its workforce. Seems like there are more layoffs to take place in the coming days. Fresh reports suggest that Meta’s CEO is reportedly asking some of his managers and directors to move into individual contributor roles or simply resign. Zuckerberg said the company would work to increase efficiency.
During one of the recent internal meetings, Mark Zuckerberg said that he was trying to speed up the company’s decision-making process by “eliminating some layers of middle management.” Sources close to the development said the process is known internally as “flattening”.
According to a new report from Bloomberg, senior executives will share the directive with their subordinates in the coming weeks. It is said that individual contributors will not be in charge of others, but will instead focus on tasks such as coding, design, and research. In addition, regular reviews of the company’s performance are currently ongoing and employees who perform poorly may also be affected by layoffs. However, the meta has not revealed any concrete details about the same.
Recall that Zuckerberg fired 13 percent of Meta’s total workforce in November. The number was around 11,000. Layoffs were happening all over the world, including in India. Zuckerberg recently announced the company’s profit and also said that the organization was too slow and bloated. Meta’s CEO also called 2023 “the year of efficiency” and said he is working to make the company efficient.
Meta Firing Employees
With Facebook, Instagram, and WhatsApp, Meta has a firm foothold in the media ecosystem. The company saw a decline in daily active users for the first time in 18 years, after the rising popularity of Tik-Tok.
Add that to the weak economy, Apple’s privacy initiatives, and CEO Mark Zuckerberg’s full commitment to virtual reality and the company’s fortress is showing cracks. It recently announced significant layoffs.
Notice Of Dismissal
Until the layoff, the company was on a seemingly endless recruiting spree. Hiring top talent and offering unique employee benefits that included 30 days of paid vacation every five years went a long way.
The company is now cutting employee benefits budgets and shedding some of its properties. CEO Mark Zuckerberg had taken steps to slow spending before the layoffs but ultimately decided to let employees go.
Why do you need to lay off employees?
At one point in 2021, the company was valued at $1 trillion, but Meta’s value and stock price have been heavily influenced by several factors. In July 2022, the company posted its first-ever revenue loss in advertising revenue, reporting a 4% loss in revenue for the third quarter of 2022, from $29 billion to $27.7 billion.
When we dig deeper into this number, we find that ad impressions, or the number of ads shown, increased by 17% year-over-year. However, advertisers are spending less on ads, with the average ad price down 18% year-on-year. With Apple’s new update, users must opt-in to track data, making it harder for Meta to sell highly targeted advertising. This type of ad isn’t as valuable, so advertisers pay less.
In addition, the economy is weakening and may enter a recession in 2023. As a result, many companies are cutting costs, and advertising budgets are often among the first to be affected. All these factors are impacting Meta’s revenue. In an earnings report, Meta said they expect Reality Labs’ operating losses to widen in 2023. This statement concerned many shareholders. The company continues to spend regardless as it builds the meta version but offers no estimate of when the project will turn a profit.
If sales are down, the company will have to make some tough decisions. Reality Labs’ third-quarter revenue was down 49% due to lower sales of the Quest 2. Meta is not alone in its losses. Almost every major tech company has seen a loss in revenue and value since the Federal Reserve began raising the federal funds rate. Nor is the company alone in laying off staff and implementing hiring freezes in response to financial pressures. What is different is the fact that Meta is not withdrawing funding from its metaverse project.
In contrast, other tech companies such as Amazon are backing away from projects that don’t show signs of profitability soon.
Meta Moving Forward
During the latest earnings call, Mr. Zuckerberg focused primarily on his vision for the meta version, insisting that it was the future of social media. He mentioned that the number of daily users of all their social media grew to 2.93 billion in the third quarter of 2022. Mark has total control over meta. This means that no one can reverse his decision to spend money on his metaverse project, even if it shows no signs of profitability.
The concept of a virtual reality world was previously tried in a virtual universe known as Second Life, which ultimately failed to gain widespread acceptance and traction. Another concern about metaverse is that Meta employees are not using it and some users may feel uncomfortable using a VR headset.
Bottom Line
So far, Facebook, Instagram, and WhatsApp are profitable. Their management is stable and risk-averse. It is less likely to disrupt a successful business model, even at a loss of revenue. Unfortunately, there is no timeline for when this will become profitable for the company.
Poor assumption of the online landscape
The post-Covid world has rapidly moved online and the rise of e-commerce has led to huge revenue growth. However, trends have returned to earlier methods.
Bad business decisions
Based on incorrect assumptions, Meta significantly increases its investment, but the macroeconomic downturn, increased competition, and the loss of advertising signals caused Meta’s revenue to be much lower than expected.
What will the laid-off employees get?
Meta will pay 16 weeks of basic pay plus two additional weeks for each year of service without limitation. All those affected will receive their claim on November 15, 2022. Meta will also provide three months of career support with an external contractor, including early access to unpublished job leads.
edited and proofread by nikita sharma
